What Is a Beneficiary?

What Is a Beneficiary?

A beneficiary is any person, group, or entity that you designate to receive something from your estate after you pass away. This can include money, property, or specific assets like a car, piece of jewelry, or family heirlooms. Beneficiaries are named in your will or in other legal documents like life insurance policies or retirement accounts.

There are typically two types of beneficiaries:

1. Primary Beneficiaries: These are the people or organizations you designate to receive your assets first. If you pass away and your primary beneficiaries are still living, they will inherit the specified portion of your estate.

2. Contingent Beneficiaries: These are individuals or organizations that inherit your assets if the primary beneficiary is unable or unwilling to accept them. For example, if your primary beneficiary passes away before you do, the contingent beneficiary would step in to receive the inheritance.

Beneficiaries can be family members, friends, charities, or even a business. However, it’s important to be clear and specific in your will to avoid confusion and disputes later on. There are exceptions to who can be named as beneficiaries in your will - click here to learn more.

How to Name Beneficiaries in Your Will

Naming beneficiaries in your will is a straightforward process, but it requires attention to detail to ensure everything goes smoothly after your death. Here are the recommended steps to follow:

1. List Your Assets
   Before naming your beneficiaries, make a list of all the assets you want to leave behind. This could include real estate, financial accounts, personal belongings, and any special items you wish to leave to specific people.

2. Choose Your Beneficiaries
   Decide who will receive each asset. This could be a family member, friend, charity, or another entity. You may want to designate a primary beneficiary for each asset, as well as a contingent beneficiary in case the primary beneficiary is unable to inherit.

   For example, you may decide that your son will inherit your home, while your daughter will receive your jewelry collection. Your spouse might be your primary beneficiary for your bank accounts, with your sister as the contingent beneficiary if your spouse has passed away.

3. Be Specific and Clear
   The more specific you can be in your will, the better. Vague or unclear instructions can lead to confusion or even legal battles between family members. For example, instead of writing, “I leave all my property to my children,” specify the address of your house or the amount of money each child should receive.

   • Example: "I leave my home at 123 Maple Street to my son, John Doe. If John is unable to inherit the property, I leave it to my daughter, Jane Doe."

4. Consider Non-Probate Assets
   Not all assets are distributed through your will. Certain assets, like life insurance policies, retirement accounts (401(k)s, IRAs), or joint bank accounts, may have beneficiary designations that override what’s in your will. Be sure to check and update these designations regularly.

5. Appoint an Executor
   While this step doesn’t directly relate to naming beneficiaries, appointing an executor for your will is an important part of the process. The executor will be responsible for ensuring that your beneficiaries receive their inheritance and that your assets are distributed according to your wishes. For more information on appointing an Executor, click here.

6. Review and Update Regularly
   Life circumstances change, so it’s important to review and update your will periodically. If you have a child, get married, or experience a major life event, you may want to update your beneficiary designations to reflect those changes.

What Happens if You Don’t Name a Beneficiary?

If you don’t name a beneficiary for an asset or if you don’t have a will at all, your estate will be divided according to the laws of your state. These laws, known as “intestate succession laws,” vary by state but typically give priority to your closest relatives (spouse, children, etc.). However, without a named beneficiary, the distribution could become more complicated, leading to potential delays or disputes among family members.

Disclaimer: We’re not legal professionals, and the content here is based on our own experiences, research, and the expert advice we've received. Our goal is to offer helpful guidance to get you started on your end-of-life planning journey. We’re here to make those conversations a bit easier, and while we aim to provide reliable information, this blog is not intended to serve as legal advice. We always recommend consulting with a qualified legal professional to finalize your plans.